CHAPTER 1

INTRODUCTION TO
QUANTITATIVE BUSINESS
ANALYSIS
Introduction
What is Operations Research (OR)?
- OR is the scientific approach to managerial decision making.
OR involves the application of mathematical model to develop a
model and then to develop a solution.
Many areas such as business, government, education and etc have
been used the techniques.
OR also referred to as quantitative analysis, quantitative method,
management science and decision science.
History of OR
Frederick W. Taylor who in the 1900s pioneered the principles of the
scientific approach to management.
First formal activities were initiated in England during World War II.
A team of scientist set out to make a decision regarding the best
utilization of war material.
These new developments were so successful that after the World War
II many companies started using the similar techniques in managerial
decision making and planning.
The Operations Research Approach
1. Defining The Problem
The problem must be clearly and concisely defined.
Must identify the right problem.
May require specific, measureable objectives. Eg: hospital.

2. Developing a Model
Simply stated, a model is a representation of a situation. (mathematical
model)
Models contain variables(controllable, uncontrollable) and parameters
Good model characteristics should be solvable, realistic, easy to
understand and easy to modify.
3. Acquiring Input Data
Obtain the data that are used in the model. Must be an accurate
data.
Data may come from: company reports, company interview, on-site
direct measurement, and statistical sampling.

4. Developing a Solution
Involves manipulating the model to obtain the best(optimal) solution
to the problem.
Various method:
Solution of equation(s)
Trial and error
Complete enumeration
Implementation of algorithm
5. Testing the Solution
Before the solution can be analysed and implemented, it needs to be
tested completely.
Determine the accuracy of the input data: collect the data from a different
source and compare.

6. Analysed the Result

Analysing the result starts with determining the implications of the
solution,
Sensitivity analysis determines how the solutions will change with
different model or input data.

7. Implementing the Results

This is the process of incorporating the solution into the company.
Example: Developing the OR model
The Advantages of Mathematical Modelling
Models can accurately represent reality.
Models can help a decision maker formulate problems.
Models can give us insight and information.
Models can save time and money in decision making and problem
solving.
A model may be the only way to solve some large problem.
A model can be used to communicate problems and solutions to
others.
END OF CHAPTER 1